Assume It Takes the Bank of Canada Four Months to Understand

Multiple Choice

Assume it takes the Bank of Canada four months to understand that a demand shock has occurred in the economy,and another one month to adjust policy to the shock.The initial four-month time period refers to the ________,and the following one-month time period refers to the ________.

A) impact lag; implementation lag
B) recognition lag; implementation lag
C) implementation lag; policy lag
D) policy lag; impact lag